BBVA RISK SHARING FOR SMES & CLIMATE ACTION

The operation consists in a Delinked Risk Sharing guarantee to finance a new portfolio of eligible projects carried out by private individuals, home owner associations, small and medium-sized enterprises (SMEs) as well as mid-caps in Spain. The guarantee will be used to cover up to 50% of the credit risk associated with a Spanish bank's corporate and mid-cap loan portfolios, while 50% will focus on Climate Action (green mortgages and high-efficient new buildings).

The aim is to promote and accelerate private sector investments as well as facilitating access to finance for SMEs and mid-caps, a backbone for the Spanish economy in terms of growth and employment.

The proposed transaction consists of a delinked risk sharing guarantee between BBVA and the EIB, under a partial delegation approach, aimed at creating additional lending capacity for SMEs & MidCaps in Spain. The guarantee aims to promote and accelerate private sector investments as well as facilitating access to finance for SMEs & Midcaps. The operation will help address the working capital, liquidity needs and investment constraints of SMEs & Midcaps.

In addition, the operation will also target investments in Climate Action initiatives, more specifically energy efficiency investments in residential buildings (new construction). Energy efficiency investments in buildings suffer from a number of market failures (negative CO2 externalities, asymmetric information, and split incentives). As a result of these market failures, investments in energy efficiency are at sub-optimal levels from a socio-economic perspective. The proposed operation is expected to contribute to the provision of high quality and energy efficient housing and contributes to supporting the Spanish government's climate change mitigation ambitions by addressing the suboptimal levels of investments in highly energy efficient building construction.

The Promoter is deemed capable of implementing the project considering its overall experience on the Spanish market and previous EIB operations.

Some of the projects are expected to be located in less developed and transition cohesion regions. The operation enhances access to finance for final beneficiaries for Climate Action related investments which stems from the market failure of asymmetric information and improves financing conditions for them through long term tenors and favourable financing conditions. Financial intermediaries, including BBVA, are pivotal in this transition, as financing is crucial for unlocking the investments needed.

The intermediary is financially sound and has a long track record of implementing EIB products. The EIB is a key partner to BBVA to achieve its green finance target and has developed specific EIB products, including those targeting green financing with EIB requirements for its branch network and clients.

The operation falls within the scope of the EIB's Environmental and Social Standards - "Standard 11 Intermediated Finance". The Financial Intermediary has adequate capacity, systems and processes in place for identifying, assessing, managing and monitoring environmental, climate and social (ECS) risks related to the potential sub-projects benefitting from EIB support. The Final beneficiaries will be required to comply with applicable national and EU legislation in respect of environmental and social matters, as appropriate.

In accordance with the EIB's policy to ensure that sub-loans comply with the EU acquis, in particular in the fields of environment and public procurement, BBVA has to to take all the requisite measures to ensure that the environment and procurement procedures carried out by the final beneficiaries, will comply with the relevant EU legislation and the applicable national legislation, provided that these are in line with EU rules.